Gold Falls as Dollar Gain, Oil Drop May Curb Investment Demand

By Jae Hur

Nov. 26 (Bloomberg) -- Gold declined from a six-week high as a rebound by the dollar and lower oil prices eroded the appeal of the metal as an alternative investment.

Bullion fell as much as 1.2 percent as the dollar gained for the first time in four days against the euro after the Federal Reserve pledged $800 billion to help ease the credit crisis for homeowners, consumers and small businesses. Crude oil tumbled 6.8 percent yesterday.

“The dollar’s rebound and a drop in oil prices have made gold less attractive,” said Tatsuo Kageyama, an analyst at Kanetsu Asset Management Co. in Tokyo. “We may see some profit- taking before the long U.S. holiday starts tomorrow.” U.S. markets will be closed Nov. 27 for Thanksgiving.

Gold for immediate delivery fell 0.8 percent to $814.22 as of 1:39 p.m. in Singapore. The metal touched $830.99 yesterday, the highest since Oct. 16. Silver for immediate delivery fell 0.7 percent to $10.255 an ounce.

The dollar was at $1.2964 per euro after touching $1.3080 yesterday, the lowest since Nov. 5. Crude oil for January delivery rose 0.8 percent to $51.15 a barrel,

The Fed will purchase as much as $600 billion in debt issued or backed by government-chartered housing-finance companies. It will also set up a program of $200 billion to support consumer and small-business loans, the Fed said in statements yesterday in Washington.

Since the second quarter of 2007, banks worldwide have posted $971.2 billion in losses and writedowns related to the credit crunch. The U.S. has already committed $700 billion to help bail out banks. Fed policy makers have also lowered the benchmark interest rate to 1 percent from 5.25 percent in September 2007.

Gold for October delivery on the Tokyo Commodity Exchange was up 0.2 percent at 2,472 yen per gram ($808 an ounce) at 2:41 p.m. local time after jumping by the 150 yen limit yesterday.

December-delivery gold declined 0.6 percent to $815.60 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net